Time to Buy

Recent events have confirmed that we may be in a bull market

TL;DR

On May 5th, I bought some exposure to the S&P 500 index via SPLG and some OTM call options on the index (see blog post here). Since then, those call options have broken through the strike price and several catalysts have emerged that have strengthened my bullish positioning. Game on!

The combination of a landmark court ruling on tariffs, significant potential fiscal stimulus via the One Big Beautiful Bill Act (OBBA), and resilient corporate earnings has made me more bullish on U.S. equities. Furthermore, risks that were prominent earlier this month (rising bond yields, tariff impacts, deficit concerns, etc.) seem to be fading. This is a potent combination, and I try not to overthink things with a setup as nice as this.

Bullish Catalysts:

• Court Rejects "Reciprocal" Tariffs

• One Big Beautiful Bill Act (OBBA) Passes House

• Resilient Corporate Earnings & Consumer Confidence

Disclaimer: The views and opinions expressed are solely those of the author and do not necessarily reflect those of the author's current employer. This material is for informational purposes only and is not intended to provide legal, tax, financial, or investment advice. Recipients should consult their own advisors before making these types of decisions. The author is not responsible for errors, inaccuracies, or omissions of information; nor for the accuracy or authenticity of the information upon which it relies.

Court Rejects "Reciprocal" Tariffs

On May 28, 2025, the U.S. Court of International Trade struck down President Donald Trump’s sweeping “reciprocal” tariffs, ruling that he exceeded his legal authority in imposing them. The court's unanimous decision, if upheld through an expected appeal by the administration, would invalidate the bulk of Trump's tariff program. This includes the 30% tariffs on China, 25% on Mexico and Canada, and 10% universal tariffs that had created significant market uncertainty.

The immediate market reaction (U.S. stock futures rose) suggests investors view the court's intervention as removing a significant overhang. The ruling could remove a drag on corporate margins and consumer purchasing power. Furthermore, a benign inflation reading in April, combined with reduced tariff pressures, gives the Federal Reserve more flexibility on monetary policy.

One Big Beautiful Bill Act Passes House

The passage of the One Big Beautiful Bill Act (OBBA) through the U.S. House of Representatives signals a massive potential liquidity injection into the economy. The bill is projected to add $2.5 trillion to primary deficits over the coming decade, increasing the national debt by an estimated $3.1 trillion, including interest.

Key provisions include:

• Permanent extension of the 2017 Tax Cuts and Jobs Act.

• Tax cuts on overtime pay, tips, and Social Security benefits.

• Measures to raise the debt ceiling.

Despite concerns about long-term debt sustainability, this fiscal stimulus provides near-term support for economic growth.

Resilient Corporate Earnings & Consumer Confidence

Corporate earnings have shown remarkable resilience across multiple sectors this quarter:

• Nvidia reported first-quarter earnings that beat estimates, with the stock rising over 4% in after-hours trading. Its continued strength reinforces the AI investment theme.

• Macy's stock added more than 2% after reporting earnings that surpassed estimates.

• Abercrombie & Fitch and Dick's Sporting Goods climbed more than 14% and nearly 2%, respectively, following their quarterly reports.

• Box (cloud storage) shares rallied about 10% after posting Q1 earnings and revenue that topped expectations and issuing strong Q2 and full-year guidance.

Furthermore, the Conference Board's Consumer Confidence Index saw a notable improvement in May after several months of decline. This rebound was largely attributed to a perceived easing of U.S.-China trade tensions (following an announced pause or reduction in some tariffs mid-May) and a more optimistic outlook for future income. Consumers also showed increased purchasing intentions for homes, cars, and big-ticket items, further supporting potential earnings growth.

Conclusion

What a difference a few weeks can make! The recent trifecta of a tariff takedown, massive fiscal stimulus via the OBBA, and consistently strong corporate earnings have made me more bullish on markets. When markets give you a gift, don’t fight it.

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